Is Dragon’s Den the new port of call for cash-strapped firms?

With banks hanging desperately onto funds and not lending, shareholders exhausted after a spate of cash calls and stock market flotations virtually non-existent, where’s a company exec to go for a bit of cash to fund a new venture? The answer, it appears, could be Dragon’s Den, the BBC’s business entertainment programme.

Usually the “Dragons”, five multi-millionaire investors whose experience ranges from hotels to telecoms and lingerie, have to decide whether or not to invest a couple of hundred thousand pounds to someone who has come up with a new idea in their back garden.

In an episode broadcast this weekend, however, Stephen Voller, the former chief executive of an AIM-listed company appeared in the Den to ask for a whopping 2.5 million pounds, the largest amount ever requested on the programme, for his new electric car venture.

While one dragon initially seemed keen, the others, Theo Paphitis in particular, roundly dismissed his idea as being far too risky, pointing out that his budget of 10 million pounds for development and launch was miniscule and would never produce a model worthy of competing with the big manufacturers. They stuck the boot in further by pointing out that when the car made to market in at least two years’ time it would already be outdated.

What the episode didn’t offer viewers was a bit of Stephen’s history. He has come across funding problems before at Voller Energy, the fuel cell company he co-founded and headed for seven years. Voller Energy ceased trading in November last year after it failed to secure funding (although I don’t think the Dragons were asked for their input at that time) and it currently exists as a cash shell, waiting for investment.

The company had floated in 2005, raising 10 million pounds. A month after listing its shares were trading at about 82 pence apiece. Within three years however, the price had collapsed to just 10 pence per share, and they are now worth less than a penny each, leaving many investors out of pocket.

Perhaps the Dragons were wise to keep their money to themselves this time?

The ‘dragons’ on dragon’s den have a great deal of money behind them, and for good reason – they have business sense, a keen eye for detail and avoid stupid investments. Which is why, regardless of how many companies like this come for cash, it won’t make a shred of difference.

Similarly, if the approach ahd been made to the commercial arms of any UK bank, a similar resonse would have been received – I’m out. Maybe we will see more like this and that would be a good thing. The Banks have been roundly criticised for not lending in this climate, so for the Public to see a flavour of the more ‘interesting’ schemes presented almost daily can only be a good thing.

I would imagine that right from day one, they’ve been deluged by appeals like this, but most of them will have been winnowed out before the “finalists” we see on air. I remember working for hopelessly optimistic companies like this in the 80s and not a VC or angel was left unmolested in the hunt for cash. Perhaps Voller Energy was chosen “pour encourager les autres”.

However, the Dragons aren’t exactly consistent. I recall (in the second series) they dismissed someone out of hand because we was already a millionaire and therefore “didn’t need” them; however, earlier this series they treated the fact that someone was already a millionaire as proof of his business credibility. Go figure….